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Why NIO Surged More than 4% Today

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Jan. 30 2019, Published 1:44 p.m. ET

NIO stock

Yesterday, Chinese electric car company NIO (NIO) announced a $650 million proposed offering of convertible senior notes due 2024. This announcement implies that the company plans to raise funds with a five-year convertible bond. Let’s take a look at some other highlights of the update.

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Key highlights

NIO, often called the Chinese Tesla, has been burning cash real fast on expectations of future growth. At the moment, NIO only sells its electric cars (XLY) in China and completely relies on the Chinese market’s (MCHI) electric vehicle demand.

While Chinese auto demand has stagnated over the last few months, the country’s’ electric vehicle sales have shown consistent positive growth.

In its press release about the update, NIO mentioned that it “plans to use part of the net proceeds from the Notes Offering to pay the costs of the capped call transactions.”

The company also revealed that Chinese tech giant Tencent Holdings (TCEHY) is likely to purchase up to $30 million of its proposed offering. At the same time, Hillhouse Capital Management is expected to buy up to $10 million of NIO’s new bond offerings.

NIO’s update about its fundraising efforts for these proposed offerings could be one reason why its stock rallied today. At 12:42 PM ET, NIO was trading with 4.1% gains for the day.

NIO is expected to release its fourth quarter of 2018 results in the next couple of weeks, but it hasn’t announced its earnings date yet. On Wednesday after the market closed, American electric carmaker Tesla (TSLA) will be releasing its fourth-quarter earnings report.

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